Supporting PE-backed management teams

Four golden rules, one silver bullet

By Patrick Jones: Managing Director

Sky-high valuations, brutal competition and zero tolerance for error are causing private equity firms — which have more than tripled in number since 2000 and have a reported $2 trillion to deploy — to dramatically improve the way they identify and support management teams.

Gone are the days when PE firms could rely on a reasonably experienced leader to deliver on value. PE now uses enhanced talent assessment techniques such as psychographics, organizational health diagnosis, and public information from social media for insights into how their people tick. Larger firms have set up in-house talent acquisition capabilities in anticipation of deal flow, and they align their talent deeper in the organization to specific value drivers.

More significantly, some PE firms are now supporting leadership with techniques traditionally used by large corporates. This includes management consulting techniques — using either in-house resources or outsourced experts.

The Golden Rules

This does a lot of good! Specifically, about 80% of the most successful PE portfolio companies with breakout performance support their management teams by enabling the following four things: they get deep insights into the organization from trusted advisors and third parties; they develop clear goal alignment amongst investors and management; they create and cascade solid strategy to execution plans; and they facilitate significant structured interactions amongst the leadership team in the first 100 to 120 days of significant inflection points. There are other things that drive value but some combination of these four seem to be present in almost all success stories.

There are key interventions that can ensure that these elements are brought to bear in support of management. We at Brimstone recommend appropriate application of the following seven interventions to emulate what we see happening at the most successful companies:

1. Coaching: Use a positive, transparent and customized approach to meet the leaders’ specific needs and goals. Ensure that the coaching process is disciplined, with clear goals.

2. Diagnosis: Activate a team of truth-tellers to formulate insights on specific topics. Manage the process by analog or digital means so that people inside the organization lead the conversations and articulate the insights.

4. Critical Issue Business Acceleration Teams: Unleash the best and brightest employees on the business’s most pressing challenges and biggest opportunities. This creates a unique opportunity to quickly deliver a result while simultaneously growing a core group of change agents to drive transformation. Ensure that these change agents develop the capabilities required in the transformed organization.

5. Organizational Alignment Meetings: Align all levels of the organization around direction and priorities and get them actively engaged in executing on those priorities. This also involves modeling new ways of leader behavior — and new ways of working — to the organization. Equip people at all levels of the organization with ways to align their teams to the new direction and behavior.

7. Leadership Forums: Develop the next generation of leaders through high-impact experiences that accelerate learning. Ideally, give leaders in the organization a platform for teaching their perspectives and drive leader development through action-learning experiences.

By supporting leadership with these types of highly structured processes that help keep the organization aligned and focused on its priorities, PE firms can de-risk their investments and bend the time curve in their favor.

These processes are not new to corporate America: We at Brimstone have been implementing them successfully for two decades. What’s new is that PE firms, which have historically relied on a different set of levers, are now responding to their market realities and considering these techniques to support management in delivering on their expectations.

Contact me to learn about the unique set of processes we at Brimstone use with clients throughout the world to align organizations, develop leaders, and deliver break through results.

(Standby for my next installment which will focus on inflection points when these tools or processes are applicable to the portfolio company)

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